Actives and pasives

The difference between assets and liabilities.

An asset is something that pays you money, while an asset is something that costs you money.

So let’s look at some examples.

Is property an asset or a liability?

Some people may say that it is an asset because it is something that you own, however if you owe money on that property and you are not getting a return then it is a liability because it is costing you money.

Is it an asset if you receive the rental of that property?

Only if you are making a profit.

Some people would disagree with saying, “Property is increasing in value over time.”

Let’s not forget that there are fees to pay plus maintenance and insurance costs to pay on that property, so it could cost you money in the long run, but you will have to sit back and do your homework.

Other investment times are less complicated, such as the stock market, so let’s look at other types of investment that are active.

Assets

Your retirement fund

Mutual funds, also known as managed funds

Other investments

Business or farm

Learn how to invest your money in items that can be quickly converted to cash; Some investments don’t allow you to quickly convert the asset to cash without going through various hurdles.

passive

Any item that has money owed and this is its form of transportation, however, there are circumstances where it can be an asset, such as if the vehicle is used as a taxi, making it an asset as it is producing income. Those costs and money owed on the vehicle may be tax deductible. The same applies to any vehicle used in a business.

Although a vehicle used for work and business purposes can be classified as an asset, the money owed for that vehicle is a liability and will be deposited into accounts as such.

The reason so many people are in such a precarious financial condition is that they borrow something instead of saving, and therefore pay more for that item in the form of interest payments.

A pet can be classified as a liability if it costs an arm and a leg to maintain it. Take a dog, for example; I read somewhere that having a dog for your life costs $ 20,000. That’s not just the food, but the vet bills and the like. A dog can be classified as a liability.

Make a balance

Before you know where your money is going, you need to take stock of all your expenses. This way you will know where to save and redirect that money elsewhere.

Your task should be to reduce liabilities, which means reducing debt, and then once you have savings, use it to build your wealth. This involves setting goals that will increase your wealth and not send you home to the poor.

There are a number of equity market platforms where you can trickle money into the markets. Take advantage of these as they are a great way to build your financial education.